Chapter 33 Quiz (AP Macroeconomics)

aggregate demand left

Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

The price level is higher and real GDP is unchanged

Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. How is the new long run equilibrium different from the original?

Short run aggregate supply left

Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. In the long run, the change in price expectations created by the stock market boom shifts

both the price level and real GDP rise

Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. In the short run, what happens to the price level and real GDP?

The expected price level rises. Bargains are struck for higher wages.

Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. What happens to the expected price level and what impact does this have on wage bargaining?

Aggregate demand shifts right

Imagine that in 2010 the economy is in a long run equilibrium. Then stock prices rise more than expected and stay high for some time. Which curve shifts and in what direction?

Short run aggregate supply shifts

Which of the following would cause prices to fall and output to rise in the short run?

The price level, but not the real GDP

According to classical macroeconomic theory, changes in the money supply affect

an increase in the price level but does not change real GDP

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

falls, shifting aggregate supply right

An economic contraction caused by a shift in aggregate demand remedied itself over time as the expected price levels

Interest rates rise, so firms decrease investment

Other things the same, when the price level rises

Increased consumption, which shifts the aggregate demand curve right

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire

The slope of the aggregate demand curve

The wealth effect, interest rate effect, and exchange rate effect are all explanations for